New Bank Debt Collection Tools
To Lower Bank Chargeoffs and Defaults

The U.S. economy is experiencing a recession, and with growing unemployment, a sluggish real estate market, as more homeowners fall behind on their home loans and face more foreclosures, along with decreasing property values, as well as a credit crunch, consumers are fighting just to stay afloat.

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Because of years of steadily rising consumer debt, banks are facing ever growing credit card delinquencies, checking account and loan defaults, as consumers struggle to pay for the necessities. Financial institutions are trying new strategies to help with bank debt collection efforts.

Read more about bank card debt.

Here are some suggested bank debt recovery tactics, some of which might help with your bank debt collection as well.

• Offer flexible plans for customers experiencing financial hardship.
• Create "hardship" programs for borrowers who are late with their payments.
• Extend or lower payments, interest rates, or lower fees when you anticipate customer payment problems.
• Create communications channels where customers can openly discuss their issues. By proactively reaching customers early, you can prevent larger problems later.

All banks have a percentage of customers who will go into delinquency, but this economy calls for new measures, as it is affecting even the banks' best customers: those that always pay on time, and keep within safe credit limits. For instance, you might want to pay attention to the customer who suddenly start to pay the minimum balance if they've had a history of paying more than the monthly minimum. It could be a sign of a future problem intensifying.

When To Outsource Bank Debt Collection to Collection Agencies

Another "must-do" for institutions with growing bank debt collection problems is quickly getting rid of, and outsourcing bad debt accounts. If you implement some of the earlier suggested tools, you should be able to identify very early on, and be able to separate the customers that you can work with through payment arrangements from the more problem customers. These problem accounts need to be identified early in the process, and handed over to an outside collection agency. Failing to do so, not only decreases your likelihood of getting paid on them at all, it costs you far more in time, resources, etc. Debt portfolio scoring is another tool that can help you quickly identify problem accounts before they default.

Some collection agencies offer programs specifically designed to retain banking customers BEFORE the account is closed or charged off. In fact, research has shown that customer retention of 70% or better can be achieved, and restoration from negative account balances. Typical collection costs average .05 cents for every dollar recovered!

The important key is to reach these customers before the account is charged off, not afterward. Not only can customers be "incentivized" into rectifying their negative account status. But it is also proven that after a delinquent account is charged off, past due customers often enter into new banking relationships with other institutions. Once this occurs, there's less incentive for that customer to bring current their past due account.

Here are some important features to look for when considering outsourcing bank debt collection:

• Overdrawn Checking Accounts- Look for collection agencies that offer pre-charge off, as well as post charge off solutions for their Demand Deposit Accounts (DDA). Debt collection recovery rates in a pre-charge off scenario are easily 4-5 times higher than post-charge off!

  In addition, with minimal or no computer programming requirements, these can work seamlessly with most popular in house overdraft privilege providers, such as Pinnacle™.

  Discover more how pre-charge off collection solutions can work in tandem with your existing overdraft protection program.

• Automated Systems- Account collection activity, such as stops, starts, reporting partial payments, paid in fulls, etc. can be updated daily with a simple file upload. This eliminates lots of manual data entry, thereby freeing up internal staff for other important functions. It’s also much more efficient. Delinquent customers can usually pay their arrears at any of a bank's branches, with the file reporting showing the updated payments.

• Loans- This systematic approach can also increase recoveries for your secured and unsecured loans, commercial loans, student loans, as well as credit cards.

Benefits To Your Bank

• Demand Deposit Accounts (DDA)- A debt collection agency can recover on those overdrawn demand deposit accounts before they are charged off, thereby helping tremendously with customer retention. For example, by using this strategy, you can improve on your overdraft program, and retain more checking account customers BEFORE charge-off.

• Loans- By implementing a systematic approach to loans (unsecured, secured, student loans, auto, home loans, commercial, credit cards, etc.) means faster and maximum recovery if these are outsourced at a specific interval.

• Automation- Collection agencies specializing in bank debt collection will offer automated online processes to monitor account activity. You should be able to notate partial payments, paid in full's, as well as automatically upload delinquent accounts online effortlessly.

  An added cost benefit is this will free up internal staff considerably from having to handle collection calls, letters, visits, etc., to handle more important banking tasks.

No account should be held in house past 60 days or so, before being turned over to third party collection agencies. 60 days is usually long enough to determine whether you're dealing with a problem account. And the sooner the account is handed over, the better the collection agency's success rate will be to recover at least some of your money.

If your bank or credit union would like a debt collection agency quote, complete the brief form below. One of our consultants will contact you shortly.